Number of the Week: Using Big Macs to Compare Wages

195:The number of minutes of work it takes for a McDonald’s employee in India to earn enough to buy a Big Mac.

Comparing wages across countries can be difficult, but one economist has come up with a way to track people doing identical jobs to make an identical product all across the world: McDonald’s employees. Just comparing how much money workers make across countries is too simplistic. A better guide can come from taking a wage rate and dividing it by a good, which allows economists to see how much of that product an hour of work buys — a so-called real wage. Properly constructed measures that change over time could be used to test to effects of public policies or economic shocks across nations. In order to calculate a real wages across countries Orley C. Ashenfelter of Princeton University found an excellent example using McDonald’s employees. In his paper published by the National Bureau of Economic Research, Ashenfelter notes that McDonald’s workers across the globe by design are asked to perform the same tasks to build the same product: a Big Mac. By calculating how many hours of work it takes an employee to earn enough to afford a Big Mac, he can show how wages change across countries. As one might expect, poor countries have to work longer to afford the same goods. For example, in 2011 a worker in a McDonald’s in China would have to work 85 minutes to afford a Big Mac. That compares to just 27 minutes on the job before an American employee earns enough to buy the sandwich.